JPMorgan Well Prepared for Higher Rates, Dimon Says

Written by: Shanthi Bharatwaj06/11/13 - 3:03 PM EDT

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NEW YORK (TheStreet) -- Borrowers should be ready for higher interest rates, as "rates are going to go up"JPMorgan Chase Chairman and CEO said at a financial services conference hosted by Morgan Stanley on Tuesday.

But this does not have to be bad news, according to Dimon. While a "normalization" of rates after an extended period of record low interest rates might produce some "volatility," the important thing is that higher rates are accompanied by good circumstances.

If the economy is booming, more jobs are created and profitability is high, "no one is going to care," the CEO said. "I would prefer normalization in good circumstances sooner than later."

Dimon was speaking publicly for the first time since the annual shareholder meeting in May, when shareholders overwhelmingly voted against a proposal to split his dual role as Chairman and CEO>

He added that JPMorgan Chase is well positioned for a rise in interest rates. If the market yield on the 10-year U.S Treasury bonds were to move by 100 basis points, the bank would make an additional $2 billion, "all else being equal." The bank could make $5 billion more if rates were to move 300 basis points higher.

Dimon's outlook for the economy was largely positive. He maintained his view that Europe will remain a bit of a rollercoaster. In the US, corporations are in good shape, consumers are rapidly paying down their debt and "housing has turned the corner in every way shape and form."

The mortgage business should continue to do well despite rising interest rates, he said.

Rising interest rates had led to slightly lower refinancing volumes, but purchase mortgages has not been affected much. Moreover, the bank continues to see mortgage delinquencies decline at a rapid pace, resulting in more reserve releases.

The bank expects to release $1 billion in mortgage reserves in the second quarter. It is also likely to release a little ,more than $1 billion set aside for credit card losses as consumers are rapidly paying down their debt.

Shares of JPMorgan were down 1.2% at $53.71 in late afternoon trading.